Banks to get some stability after new loan-loss rules come into force

LONDON, Oct 21 (Reuters) - Banks will get a "period of calm" after new rules forcing them to provision earlier for loan-losses come into effect from 2018, a senior global accounting official said.

The rules are being introduced to avoid taxpayer rescues of banks that run into trouble because they have not set aside money early enough to cover loans that go into default.

The rules were produced by the International Accounting Standards Board (IASB), and will be mandatory for banks in more than 100 countries, including the European Union.

They have prompted concerns in the EU where banks in countries like Italy and Germany are already struggling to convince investors they are holding enough capital.

In addition, all IASB rules are reviewed on a routine basis, raising the prospect of more upheaval for the banking industry.

"We will do our post-implementation review, but the reality is that people have asked for a period of calm after all these big new standards," Sue Lloyd, the newly appointed Vice-Chair of the IASB, said in an interview this week.

The rules, known collectively as IFRS9, will mean costly upgrades for banks' IT and accounting systems as well as potentially more expensive capital.

Banks will have to make some provision even on the first day of the loan, and long before a default, the current trigger for provisioning.

"The banks are going through a really big process to implement IFRS9, so we don't want to upturn their world again in the near future," Lloyd said.

The EU must formally endorse IFRS9 to make it mandatory in the 28-country bloc. The IASB is pleased the European Parliament pulled back this month from blocking it, she said.

In a move welcomed by the IASB, the Basel Committee, which writes global bank capital rules, proposed this month giving banks more time to increase their capital buffers because of the impact of the new accounting rules.

The United States applies its own accounting standards and its loan-loss reforms force American banks to provision in full on the first day of a loan.

This means there will be greater divergence between the IASB and U.S. rules despite calls from world leaders for a single set of global accounting rules to make life easier for investors and regulators.